– EUR/USD formed an outside down bar yesterday.
– Today, so far, is a bull day. The more it closes on its high, the more reliable a buy signal bar it will be.
– There is a micro double bottom with the Sept. 20 low.
– Also, it would be a high 4 bottom. There was a high 2 attempt on Sept. 13, then a big bear breakout, and this would be a 2nd High 2 attempt with the September 20 low.
– A reversal up from here would be a higher low major trend reversal.
– Since the bear channel over the past 3 weeks is tight, the first reversal up would probably be minor and last only a few days. The bulls want the week to close above the open so that this week would be a buy signal bar on the weekly chart.
– The bears will sell a 1- to 3-day bounce, hoping for a micro double top with yesterday’s high.
– The bears need a bear follow-through day tomorrow after yesterday’s big outside down day if the selloff is to go much lower. The momentum down is enough so that there is a 50% chance that the selloff will break below the Nov. 4, 2020, low.
– But it is at the bottom of a four-month trading range on the daily chart.
– It is also at the bottom of a year-long trading range on the weekly and monthly charts.
– Since trading ranges resist successful breakouts, there should be buyers around the current level and just below last year’s low, which is the bottom of the year-long range.
– If the bears get consecutive big bear bars closing on their lows and below that November low, traders will conclude that the trading range has ended on the weekly chart and that EUR/USD has evolved into a bear trend. It has been in a bear trend on the daily chart since May.
– The bulls need at least a couple big bull bars closing on their highs before traders will conclude that a swing up to the September high is underway.